Background:
Four Star Industries Private Ltd is the manufacturer and wholesaler of the renowned Four Star Pocketed spring mattresses which was founded by Neo Gim Sin in 1966. Its business is aggressively and exclusively focused on servicing the…show more content…

Here we analyze to see if any improvements can be made on this already adopted strategy.
Safety Stock Analysis:
Refer to Figure 1 in Appendix section.
According to the case, FS keeps two weeks’ worth of safety stock for all mattress models. Hence, we assume the lead-time of order is 2 weeks. Let
AVG = the average demand per time unit
STD = the standard deviation of demand per time unit
L = the lead-time of order
D = the average demand during the lead-time
L= the standard of deviation of lead-time demand
The average demand during the lead-time is average demand per time unit multiplied lead-time.
D = L*AVG
The standard deviation of lead-time demand is the standard deviation of demand per time unit multiplied by the square root of the lead-time.
L = L*STD
To get the reasonable level of safety stock, from the standard normal table, we can find value of the constant z that corresponds to 97.5%. This is equal to 1.96. So, Safety Stock=L*1.96
Conclusion:
From Figure 1, we can see that it is obvious that the Safety Stock needed is less than 2-week mean demand. If FS could keep the Safety Stock as calculated in the table above, it will definitely save on inventory holding cost and still meet its demand.
Warehouse rent analysis:
Once safety stock is reduced, needed storage space also reduces, therefore reducing cost of renting storage capacity (warehouse). From our online research, we found that the average rent per square feet per month

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